Wales Bill

Stephen Crabb Excerpts

Monday 31st March 2014 Commons Chamber

[Albert Owen]

That is the hon. Gentleman’s position. I have made my position clear: when there are major changes on taxation, there should be a referendum. I am therefore supporting that measure in the Bill. We would lose most of the people of Carmarthen and Ynys Môn if we started talking about the lockstep. The serious problem we have is that when we eventually go to the people of Wales on a taxation referendum, we have to boil it down—[Interruption.] If he stops chuntering from a sedentary position, I will try to give an answer on a simple question that we understand in the first place. The beauty of a referendum is that we need to boil things down. The question as it is framed now would not be easy, which is what we have to work towards. That is where I am coming from on this issue.

It is very logical that the Bill proposes borrowing powers for the National Assembly for Wales. The hon. Member for Ceredigion talked about the abilities of community councils and town councils to borrow in a way that the Assembly cannot, so this is a natural progression. Many things such as stamp duty and landfill tax can produce the revenue streams to help with that borrowing. It is eminently sensible that that happens.

I repeat that we need to consult the people of Wales and have a referendum on the income tax issues in the Bill, so I support that approach. Not having those things would be out of sync with what we have done in the past, when we set up the Assembly and when we had a referendum on increasing its law-making powers. I supported both those referendums and I would support this one, too, but we have to get it right. I am as confused as anybody who has spoken in this debate about exactly what we are going to be telling the people of Wales. I know this is only a Second Reading and it is right that we debate these issues, but in Committee—that is the place to do it—we shall deal with the nitty-gritty of what the taxation actually means. The figures produced in the explanatory notes and in the Government’s various Command Papers are not easy to digest, so we need to have that scrutiny, which this House of Commons does best, before we finalise things.

There has been much debate about the position outlined by my Front-Bench team, and on that I agree slightly with the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards); those details need fleshing out just as much as any others. The purpose of parliamentary democracy is to have that debate and that parliamentary scrutiny, so that is the way we need to move forward. I have been consistent on the referendums issue, and I believe we must have a referendum if we are to move to being able to vary income tax powers or whatever the end result is of this Bill going through both Houses of Parliament.

I wish to discuss the electoral arrangements, as I am slightly confused as to why these provisions have been bolted on to this financial measure, other than to suit a deal done between the coalition parties and Plaid Cymru to try to get the Bill through. We have heard about the Government of Wales Acts. I supported doing away with the dual candidacy because I thought it was unfair and undemocratic that a person who stands for election in a seat and loses, often comfortably, can then arrive in that democratic institution through another means—that is fundamentally wrong.

When we had a debate in this House some time ago—I cannot cite the Hansard reference—the Under-Secretary told us about the consultation exercise, when people were in favour of keeping the ban on dual mandates.

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

rose—

[Albert Owen]

I am happy to take an intervention if the hon. Gentleman wishes to be helpful.

[Stephen Crabb]

I am glad the hon. Gentleman will take an intervention on that. He will be as aware as anybody that a significant number of the people responding to that consultation saying they were in favour of the ban were Labour Welsh Assembly Members.

[Albert Owen]

I do not know who the people were. The hon. Gentleman may well be right, but Labour is obviously the biggest party in Wales and has a strong voice there, unlike some other parties. It was a consultation exercise—[Interruption.] I am getting chuntering remarks from the hon. Member for Carmarthen East and Dinefwr again, but perhaps Plaid Cymru should also have had enough intelligence to do standard letters to put its view across in this open consultation. The point I am making is that this coalition proposal, supported by Plaid Cyrmru, is on the wrong side of the argument. These parties are doing it for their own political reasons. Nobody has said to me, “Wasn’t it terrible what you did in 2006 when you banned the dual mandate?” Nobody has raised the issue and it is right to leave things as they are. I shall be voting against the measure when the time comes, for the reasons I have given.

Individuals have been mentioned, which is wrong, but I must mention the leader of Plaid Cymru who, when she was elected, made a bold statement that she was not going to stand on the list. She made the brave decision to go before the electorate as an individual and leader of her party. She chose the seat for Rhondda, which she had every right to do, but now she has the jitters. She no longer feels secure in her statement, so she wants the lifeboat of a list place to get her into the Assembly for Wales; that is what this is all about. That is why I point to a deal being done. I smell a dirty deal here between the coalition parties and Plaid Cymru.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Wales (Stephen Crabb)]

It is a pleasure to close this important debate and it is good, as ever, to follow the hon. Member for Llanelli (Nia Griffith), who on this occasion gave an uncharacteristically churlish speech. I want to call her out on her comments about the contribution by my hon. Friend the Member for Forest of Dean (Mr Harper), who is always the model of courtesy and graciousness in his contributions in this House. His remarks about Wales were based on evidence and truth and were carefully made, so I commend him. He is a former Cabinet Office Minister, so he is familiar with issues pertaining in particular to fixed-term Parliaments. This debate has been enriched by his participation. It has also been enriched by the speeches of not one, but two former Secretaries of State. It was good that the right hon. Member for Neath (Mr Hain) and my right hon. Friend the Member for Chesham and Amersham (Mrs Gillan), who is no longer in her place, both gave very thoughtful contributions on issues about which they have a lot of experience.

We also heard from the Chairman of the Welsh Affairs Committee, which did a fantastic job in scrutinising the draft Wales Bill. The speech by my hon. Friend the Member for Monmouth (David T. C. Davies) in fact attracted not just praise from Liberal Democrats, but a slightly backhanded compliment from the right hon. Member for Neath, who described him as having “sincere and intelligent extremism”. As I am sure the right hon. Gentleman knows better than most hon. Members in this House, extremism in the defence of liberty is no vice at all.

We have had a fascinating and wide-ranging debate during the past few hours on matters directly, and sometimes indirectly, related to the Wales Bill. There were excellent speeches from both sides of the House, and I thank all hon. Members for their speeches.

I will limit my remarks to the Bill, but I first want to say that, regardless of points of disagreement, there has been a broad measure of consensus on and support for the Bill by all parties in the House. Just as a Dulux colour sheet has different shades, there have been different shades of support—ranging from frosty and cold by my hon. Friend the Member for Monmouth to rather grudging and unenthusiastic by Opposition Members through to warm by my right hon. Friend the Member for Chesham and Amersham. There has been support for the Bill and, as we go into Committee, we should not forget that this wide-ranging Bill enjoys broad support from hon. Members and parties across the House.

The vast majority of hon. Members clearly support the Government’s move towards achieving a strong measure of fiscal devolution that will give the National Assembly for Wales control of devolved taxes for landfill and land transactions, and enable the Welsh Government to borrow for capital investment. I hope that such a positive position continues as the Bill progresses.

I should perhaps start with the lockstep, a term that few hon. Members had probably heard before the Silk commission did its work, but one with which we are certainly becoming increasingly familiar. I know that the Government’s proposals to allow the Assembly to vary income tax rates uniformly—in other words, in lockstep—subject to a referendum, concern some hon. Members on both sides of the House. Let me be clear that this Government believe that the structure of income tax is a key mechanism to redistribute wealth across the whole of the United Kingdom, including Wales and, as such, that wealth redistribution is properly determined at UK level. The lockstep is consistent with the principle that fiscal devolution should not unduly benefit one part of the UK at the expense of another, which would result in what at least one hon. Member has called a race to the bottom. I am pleased that that position is one that now seems to enjoy the support of Labour Front Benchers, although that was not clear when we last discussed it in the Welsh Grand Committee.

There would be a real risk of a so-called race to the bottom if the Welsh Government were able to set substantially lower rates for higher or additional rate taxpayers without needing to change the basic rate. Far from making the income tax powers unusable, as some hon. Members have suggested, the lockstep makes the powers very usable, as my right hon. Friend the Secretary of State explained at the start of the debate. Devolving income tax would give the Welsh Government a crucial lever to reduce taxes across the board in Wales to make it a lower-tax economy and put money back into the pockets of hard-working people across Wales.

If electors in Wales decide in a referendum in favour of income tax devolution, the Welsh Government would become responsible for almost half the income tax generated in Wales. In reducing the tax burden on working people in Wales, the Welsh Government would reap the benefits of a growing Welsh economy and gain access to a significantly larger revenue stream to finance further borrowing. With vision and foresight, the Welsh Government could grasp that virtuous circle with both hands.

Some Opposition Members, not least the right hon. Member for Neath, raised concerns about how the application of devolved income tax will work in practice. There was some discussion of that in the last sitting of the Welsh Grand Committee, when there was a lot of confusion about whether Welsh budgets would be detrimentally affected by the devolution of 10p of income tax. Following the Welsh Grand Committee, I circulated a letter to all members of the Committee explaining, with a practical example, how that would work. I would therefore hope there would be some clarity, but the right hon. Member for Neath said that there is a risk that Wales will be cast adrift. Let me explain to him that the system of income tax devolution we are proposing protects Welsh funding in two ways. First, the lockstep retains the redistributive structure of income tax across the UK, as I have just described. Secondly and crucially, the block grant adjustment mechanism, which we are calling indexed adjustment, means that Wales is protected from UK-wide shocks. For example, if the UK tax base were to decline, the block grant adjustment will be reduced accordingly. Reducing the block grant adjustment thereby increases the Welsh block grant. Therefore, the finances of the Welsh Government are protected through that mechanism.

[Mr Hain]

I am grateful for the Minister’s views. Is he saying that, if the Welsh Government raise less, Westminster will compensate more?

[Stephen Crabb]

That is not what I am saying. A key principle of the mechanism is creating the incentive for the Welsh Government to create the conditions for the economy in Wales to grow, so that they can reap the fruits and benefits of a growing Welsh economy. The protection kicks in when there are shocks and changes that affect the overall UK tax base. When changes would otherwise have a detrimental impact on Welsh Government revenues, Welsh Government revenues are protected because of the indexation. I shall circulate further information to right hon. and hon. Members.

[Geraint Davies]

Is the Minister saying that there are only upsides? Is he saying that, if the Welsh Government do well and grow the Welsh economy, they get a greater share of overall UK revenue, and if things go the wrong way from their point of view or the UK point of view, they still get that share or more and it never goes down? I cannot believe that.

[Stephen Crabb]

There is a lot of upside in the proposals, which I hope Opposition Members have the intelligence and foresight to recognise. In fact, the Silk commission calculated that Wales would have been better off under the system we are proposing had it been in place in the past decade. That answers the question asked by the right hon. Member for Neath—he asked whether Wales will be better off. The Silk commission estimated that, had the system been in place in the past 10 years, the people of Wales would have been better off. I hope that that also provides assurance to the hon. Member for Swansea West (Geraint Davies), who sees the Bill as a nasty plot and conspiracy.

Some Opposition Members have sought to link the devolution of income tax to so-called fair funding. That is another diversion they are throwing up, and another barrier they are erecting, so that they do not have to contemplate greater and truer accountability for the Government in Cardiff Bay, which they would prefer not to contemplate. The joint statement from the UK and Welsh Governments in October 2012 established a clear process to review relative levels of funding for Wales and England in advance of each spending review. The announcement recognised that levels of funding for Wales relative to England were not currently converging, but that, if convergence in funding is forecast to resume during the period, both Governments are committed to discussing a sustainable and fair solution. The fair funding mechanism agreed with the Welsh Government in 2012 worked very well in practice ahead of the last spending review. I hope that that, too, reassures hon. Members.

Current funding levels are well within the parameters recommended as fair by the Holtham commission. Safeguards are in place to address convergence if and when it resumes. Therefore, the funding regime for Wales should not be seen as a barrier to income tax devolution. That is one more smokescreen the Opposition are throwing up to disguise their basic opposition to, and dislike of, fiscal devolution.

A number of hon. Members mentioned borrowing powers for capital investment. There is clearly a broad consensus on all sides in favour of giving the Welsh Government the ability to borrow to invest in Wales’s infrastructure. Some Opposition Members want the Welsh Government to be able to borrow more than the £500 million permitted under the Bill—some suggested they should be able to borrow a virtually unlimited amount. The UK Government have set the limit considerably higher than we would have if we had used the tax and borrowing ratios we used in the Scotland Act 2012. Had we done that, the borrowing limit would be closer to £100 million, based on the taxes devolved in the Bill. We have set a higher capital borrowing limit of £500 million initially, but with flexibility for that limit to be increased if the Welsh Government gain access to further independent streams of funding, such as an element of income tax. If Opposition Members want to see the Welsh Government have a greater borrowing capacity, they should join us in campaigning for a yes vote in an income tax referendum.

What we are not prepared to accept is reckless borrowing without the means of paying that money back. Borrowing must be commensurate with the independent revenue streams. The Government have not worked hard over the last four years to build a reputation for financial prudence and competence, and tackling Britain’s deficit effectively, only to throw away that hard-earned reputation by allowing the Welsh Government to borrow beyond their means.

The hon. Member for Swansea East (Mrs James) said that she would welcome sight of the “workings-out”—I think that was the phrase she used—to help her to understand how we arrived at the £500 million borrowing limit. I suggest that she looks at pages 26 and 27 of the Command Paper that was published alongside the Bill, which is clear on the rationale and the basis for deciding on the £500 million figure. It is higher than would have applied if we had stuck closely to the Scottish ratios, and that is because we want the Welsh Government to crack on with the job of improving the M4. That was agreed with Welsh Ministers, and it gives them the tools to make progress quickly and to tackle that major infrastructure problem.

The hon. Lady also asked why Northern Ireland’s position was different. Northern Ireland is not a good benchmark for hon. Members to use in comparing borrowing regimes. The Northern Ireland Executive exercise many of the powers and responsibilities that are exercised by local authorities in other parts of the UK. In particular, they collect the equivalent of council tax and business rates and have borrowing powers similar to those held by local authorities.

Opposition Members did not talk much about borrowing, which will have a huge, transformational impact in allowing the Welsh Government to invest in new infrastructure in Wales, and nor did they talk much about the impact of lowering taxes in Wales, creating a low-tax economy and creating new jobs. They saved most of their energy and time for discussing the ending of the ban on dual candidacy. In fact, the right hon. Member for Neath used large chunks of a speech he made in 2006, if my memory serves me right. It has been like “Groundhog Day” as Opposition Members—although I am sure they were reflecting the concerns they have heard in their constituencies—manned the barricades to oppose a sensible measure—

[Albert Owen]

Is the Minister criticising Opposition Members for referring to a measure in the Bill? Surely it is the purpose of a Second Reading debate to talk about the measures in the Bill.

[Stephen Crabb]

I am criticising Opposition Members on two counts. One is the amount of time that they took talking about a relatively minor issue, when they could have used their time to better effect by talking about the real, everyday concerns of the people of Wales who will be affected by the measures in the Bill. I also criticise Opposition Members on this issue because they are wrong. They are in the minority. All other parties support the measure. Wales is the only country with such a ban on dual candidacy.

[Wayne David]

Will the Minister give way?

[Stephen Crabb]

I have been very generous with my time, and I am not giving way again.

The Bill provides the Welsh Government with the means to take active steps to improve the lives of hard-working people in Wales. It will allow the Welsh Government to tailor devolved taxes to best fit the specific needs of Wales; it will make them accountable for some of the money they raise, not just the money they spend; and it will give them the tools to grow the Welsh economy. It also provides them with the means to make much needed investment in critical infrastructure in Wales and, if they choose, to call a referendum to devolve a portion of income tax. It is a Bill I am pleased to commend to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Wales Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Wales Bill:

Committal

The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee

(2) Proceedings in Committee of the whole House shall be completed in two days.

(3) The proceedings shall be taken on the days shown in the first column of the following Table and in the order so shown.

(4) The Proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

[Jonathan Edwards]

On a point of order, Mr Speaker. I appreciate that you were not here at the time, but the hon. Member for Llanelli (Nia Griffith) made an unjustified and improper comment about me and refused to take an intervention during her winding-up speech. Is it in order for the hon. Lady to make such a comment? What advice could you give me about securing a withdrawal and what advice would you give the hon. Lady?